Entrepreneurs pitching to investors should pay more attention to their visual cues to increase their chances of success.
Visual information, that is, body language, gestures, facial expressions and visible passion, are far more influential on investor decision-making than previously thought.
In the paper, published in Academy of Management Discoveries, the researcher found that when both expert investors and novices were played silent videos of entrepreneurial pitches, they were able to correctly identify the original investors' selections of winning pitches.
Author Dr Chia-Jung Tsay (UCL School of Management), said: "The results suggest that investors may be more influenced by visual cues than they realise. This highlights a gap between what they state as being important factors in their decision-making and what actually impacts their judgement.
"It is apparent that such a dependence on visual information is most likely to emerge in high-stake, time-pressured settings such as entrepreneurial pitch competitions."
The researcher carried out 12 studies with 1,855 participants, using footage and outcomes from live pitch competitions. In one of the key studies, 501 participants were played short recordings of either visual-only, sound-only or video-with-sound excerpts of the same segment of a pitch. Each participant viewed recordings of three finalists from nine competitions (27 excerpts in total) across a range of industries from mobile technology to life sciences.
The original pitches were judged by separate panels of industry experts, angel investors, venture capitalists and experienced entrepreneurs who fund start-ups. The panels were given time to question the entrepreneurs, as well as summaries of their business propositions and biographies of the entrepreneurs.
Of the participants who received visual-only recordings, 52.2% correctly identified the winners, which was significantly above chance. For video-with-sound recordings, 43.6% correctly identified the winners (which was again above chance) and 35.6% correctly identified them with sound-only recordings, which was below chance. Notably, participants who received visual-only recordings performed significantly better at identifying the winners than both those receiving sound-only stimuli and those receiving video-with-sound recordings.
The success rate of participants with varying levels of entrepreneurial expertise in correctly identifying winners from visual-only recordings has led the researcher to conclude that the impact of visual information in decision-making is far stronger than previously thought.
The other studies built on the initial investigation in the first study, using different designs and additional sets of pitch competitions.
To test of the dominance of visual cues in different settings, the 11 follow-up studies investigated variations including a range of expert evaluators including angel investors and repeat crowdfunding investors; different lengths of entrepreneurial pitches; other types of information typically found in pitch competitions, such as transcriptions of pitches and photographs of the entrepreneurs.
Dr Tsay added: "The results suggest that entrepreneurial passion seems to influence investors primarily through visual information rather than through other cues, including the content of the pitch. Investors pick up these cues quickly, and novices pick up these cues just as quickly.
"This suggests that we need to examine the format of pitch competitions and evaluations to ensure the best outcome is achieved for both the investor and the entrepreneur."
The study was supported by UCL and Harvard University.
